EOS POWER INDIA P.LTD,MUMBAI vs. JCIT (OSD) 8(1), MUMBAI

These are the two appeals filed by EOS Power India Pvt. Ltd. (assessee / appellant) for A.Y. 2008-09 in ITA No.862/Mum/2013 and ITA No.6881/Mum/2019 for A.Y. 2009-10 against the assessment order passed under Section 143(3) read with section 144C of the Act for respective assessment years.

The facts for A.Y. 2008-09 shows that assessee has filed this appeal against the appellate order passed by the

The assessee has raised several grounds but in substances assessee is contesting the adjustment of Arms length price of reimbursement of expenses upheld by the ld CIT (A) of Rs53744032/- on account of Marketing suoport services and Rs 8431645/- on account of IT support services.

Fact shows that Assessee Company is engaged in the business of manufacturing of switch board power supplies and other computer peripherals. It filed its return of income on 29th September, 2008, declaring net loss of ₹8,14,06,120/-. The return was picked up for scrutiny. 05. As the assessee has entered into various international transactions, reference was made under Section 92CA (1) of the Act for examination of Arm‟s Length Price of such international transactions. The learned Transfer Pricing Officer noted that assessee is engaged in manufacturing and export of Switch Mode, Switch Mode Power Supplies (SMPS) and sub-assemblies thereof. The products are in the category of electrical hardware. The international transactions in dispute are allocation of corporate expenses. In the transfer pricing documentation assessee

During the hearing assessee has preferred the additional ground of appeal by letter dated 7th December 2020, which was not pressed for its admission before us. Therefore, application is dismissed.

Therefore, only grievance against the addition on account ALP adjustment of Intra Group service of corporate expenses allocation of ₹5,37,44,032/- for marketing the support and related services and ₹84,31,645/- for IT support services. The learned Authorized Representative submitted that the learned Transfer Pricing Officer and CIT (A) has rejected the Function, Assets and Risk (“FAR”) analysis provided by the assessee and have reached at a wrong conclusion that Red Rocket Inc. (AE) is responsible for marketing support services. It was wrongly held that the amount charged by the Associated Enterprises is not

The learned Departmental Representative extensively referred to the order of the learned Transfer Pricing Officer and also of the learned CIT (A) and submitted that assessee has miserably failed to prove the rendition of intra group services as well as benefit derived from those services. Unless the above services are demonstrated with all this ingredients, the orders of the lower authorities cannot be disturbed.

We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly, in this case, the intra group services paid by the assessee are supported by agreement only for the part of the years. For the balance period merely on the basis of conduct of the assessee, the Arm‟s Length Price of intergroup

ITA No.6881/Mum/2013 is also filed by the assessee, wherein the assessee is aggrieved with the assessment order passed under Section 143(3) read with section

The learned Transfer Pricing Officer noted that assessee has made payment of ₹9 crores against the total loss of ₹42 crores. The learned Transfer Pricing Officer noted that any independent distributor would only spend maximum of 1.46% of the sales on selling and distribution and therefore, the Arm‟s Length Price of the marketing support services is only 1.46% of sales. The assessee submitted that assessee is a manufacture and not a distributor and therefore, such percentage cannot be applied in intergroup services. The learned Transfer Pricing Officer asked the assessee to show the documentation showing the benefits received by the assessee and also the breakup of the cost. Assessee submitted the breakup. He also examined the number of employees employed by the assessee. The learned Transfer Pricing Officer reached at a conclusion that documentation submitted by the assessee could not demonstrate tangible and direct benefit received by the assessee. Therefore, the learned Transfer Pricing Officer compared seven comparables with their sales, total marketing expenses and the percentage thereto. The learned Transfer Pricing Officer found that 19.54% is the marketing expenditure of the comparable companies, whereas the assessee spend is 29.99%. Accordingly, he made an adjustment of ₹4,41,05,838/- on account of Arm‟s Length Price of the above services by passing an order under Section 92CA(3) of the Act on 23rd November, 2011. Based on this, the draft assessment order was

The assessee preferred an objection before the learned Dispute Resolution Panel. The assessee objected that ld TPO has selected assessee as tested party, Assessee selected its Associated Enterprises as tested party. Ld TPO reejcetd Foreign AE as tested party because assessee claimed to have received services for the goods produced in India. Further, the learned Dispute Resolution Panel upheld the action of the learned Transfer Pricing Officer taking assessee as a tested party. The learned Dispute Resolution Panel also upheld the manner of determination of Arm‟s Length Price of the international transaction. Based on this, the final assessment order was passed on 6th September, 2013, which is challenged before us.

The learned Authorized Representative reiterated his argument made for A.Y. 2008-09. He further submitted that there is no reason why a foreign tested party i.e. foreign Associated Enterprises cannot be taken as a tested party. He otherwise submitted that intra group services have been rendered by the Associated Enterprises and they have been remunerated at Arm‟s Length Price.

The learned Departmental Representative vehemently supported the orders of the lower authorities.

In the result, appeal of the assessee is allowed for statistical purposes. Both the appeals of the assessee are allowed for statistical purposes.